Problema Solution
You want to purchase a new car in 6 years and expect the car to cost $22000 comma. Your bank offers a plan with a guaranteed APR of 6.5% if you make regular monthly deposits. How much should you deposit each month to end up with $22000 comma in 66 years?
Answer provided by our tutors
We will use the Sinking Fund formula:
S = R[((1 + i)^n - 1)/i]
where
S = $22,000 is the future value;
R is the periodic payment that we need to find;
i = 0.065/12 is the interest rate per period (since it is monthly deposit);
n = 6*12 = 72 is the number of periods (since it is monthly deposit)
R = S/[((1 + i)^n - 1)/i]
R = Si/((1 + i)^n - 1)
R = (22000*(0.065/12))/((1 + 0.065/12)^72 - 1)
click here to see the calculation
R = $110.64
Each month $110.64 should be deposited to reach the goal of $22,000 in 6 years.